Are E-Gift Cards Safe? Here’s What to Know

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As the days disappear from the December calendar, panic can start to set in as last-minute gift shopping heats up. Increasingly, consumers are easing the tension by giving digital — digital gift cards, that is.

Email gifts continue to skyrocket in popularity, with consumers preferring their ease of delivery, speed of purchase and “coolness,” according to transaction firm InComm. Apparently any stigma with giving a gift that can’t be put in a gift box is fading away.

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Among consumers who bought gift cards online (not in a store) last December, 63% skipped the plastic and sent the gift electronically, InComm said – up from 57% in 2013. And 90% of those aged 18 to 25 said they were more interested in purchasing digital gift cards than they were two or three years ago.

In fact, the later it gets, the more popular digital gifts become. In the six days leading up to Christmas last year, 88% of online gift card sales were for digital cards compared with 80% for the same period in 2013. Predictably, InComm says that Christmas Eve stands out as the biggest sales day for digital gift cards.

Secure Gifting?

However, e-gift cards raise some security issues, as all that stands between a criminal and money is a long alphanumeric code that can be stolen via cutting and pasting. And as the U.S. continues its long transition to chip-enabled EMV credit cards, some analysts predict that criminals will shift a bit of their focus towards electronic gift cards.

“As the United States begins its efforts to reduce credit card fraud by transitioning to EMV, another type of card — the online gift card — could see its fraud risk skyrocket,” wrote Chris Uriarte in PaymentsSource earlier this year. But in the InComm survey, consumers actually cited security as one of the reasons for making these digital purchases. Here’s why: Most e-gift cards come with electronic registration that makes it easier to keep track of value if a gift is lost or stolen. Physical cards, when lost, are useless unless the card has been registered with the retailer.

But e-gift cards raise other concerns: They’re easy to spend online, but can create a hassle in physical stores. Some consumers must print out evidence of the card to use it, though increasingly, the e-gifts can be stored and spent on smartphones, one feature consumers do care about, InComm says. In fact, 96% of recipients said they were “interested” in storing the cards on their phones.

Here are some other reasons digital gift cards are hot:

• 68% like the instant delivery

• 51% said they’re easier to send

• 45% said they’re easier and quicker to purchase

• 37% said they’re easier to redeem

• 36% find them secure

• 27% feel they’re harder to lose

• 22% said they’re a cool gift

• 20% said the recipient prefers them

How to Give a Digital Gift Card

If you plan to give a digital gift card, make sure the recipient gets it, as it could wind up in their spam folder. And if you receive a digital gift card, see if you can get the credit right away. Retailers like Amazon let you redeem the card immediately by storing the value on your account until you’re ready to use it. This can be smart since you won’t lose track of the email with the code and the money could be safer.

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Bob Sullivan is author of the New York Times best-sellers Gotcha Capitalism and Stop Getting Ripped Off. His stories have appeared in The New York Times, the Wall Street Journal, and hundreds of other publications. He has appeared as a consumer advocate and technology expert numerous times on NBC's TODAY show, NBC Nightly News, CNBC, NPR's Marketplace, Terry Gross' Fresh Air, and various other radio and TV outlets. He helped start MSNBC.com and wrote there for nearly 20 years, most of it penning the consumer advocacy column The Red Tape Chronicles. See more at www.bobsullivan.net. Follow Bob Sullivan on Facebook or Twitter.

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